[Federal Register Volume 62, Number 29 (Wednesday, February 12, 1997)]
[Notices]
[Pages 6588-6590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3431]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22496; File No. 812-10512]
American Skandia Trust, et al.
February 5, 1997.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the
``Commission'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``1940 Act'').
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APPLICANTS: American Skandia Trust (the ``Fund''), American Skandia
Investment Services, Inc. (the ``Adviser''), and INVESCO Trust Company
(``INVESCO'').
REVELANT 1940 ACT SECTIONS: Order requested under Section 6(c) of the
1940 Act for exemption from Section 15(a) of the 1940 Act.
SUMMARY OF APPLICATION: Applicants seek an order to permit INVESCO to
serve as the investment subadvisor to the INVESCO Equity Income
Portfolio (the ``Portfolio'') of the Fund, without formal approval by
the contract owners of the Portfolio, pursuant to a new investment
management agreement (the ``New Agreement''). The order would cover an
interim period not greater than 120 days (the ``Interim Period'') and
would permit INVESCO to receive from the Adviser fees earned under the
New Agreement during the Interim Period.
FILING DATE: The application was filed on February 4, 1997.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing on this application by writing to the
Secretary of the SEC and serving Applicants with a copy of the request,
personally or by mail. Hearing requests must be received by the
Commission by 5:30 p.m. on March 3, 1997, and should be accompanied by
proof of service on Applicants in the form of an affidavit or, for
lawyers, a certificate of service. Hearing requests should state the
nature of the writer's interest, the reason for the request, and the
issues contested. Persons may request notification of a hearing by
writing to the Secretary of the SEC.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Fund and the Adviser: P.O.
Box 883, One Corporate Drive, Shelton, Connecticut 06484-0883; INVESCO,
P.O. Box 173706, Denver, Colorado 80217-3706.
FOR FURTHER INFORMATION CONTACT: Patrice M. Pitts, Branch Chief, at
(202) 942-0670, Office of Insurance Products, Division of Investment
Management.
SUPPLEMENTARY INFORMATION: Following is a summary of the application.
The complete application is available for a fee from the Commission's
Public Reference Branch.
Applicants' Representations
1. The Fund, a registered open-end management investment company
organized as a Massachusetts business trust, currently offers twenty-
three portfolios investment options. The Adviser and INVESCO are
registered as investment advisors under the Investment Advisers Act of
1940, as amended. The Adviser serves as the investment adviser to each
portfolio of the fund pursuant to investment management agreements that
comply with Section 15 of the 1940 Act. In 1994, the Adviser entered
into a subadvisory agreement (the ``Existing Agreement'') that
authorized INVESCO to serve as the investment adviser to the Portfolio.
Pursuant to the Existing Agreement, INVESCO received fees from the
Adviser for services provided by INVESCO to the Portfolio.
2. On November 4, 1996, INVESCO PLC, the indirect parent of
INVESCO, announced its intention to merge with AIM Management Group
(``AIM''). Under the merger agreement, INVESCO PLC will acquire AIM by
issuing new shares of INVESCO PLC to the existing shareholders of AIM.
After the merger is completed, existing AIM shareholders will own
approximately 45% of INVESCO PLC and the new merged entity will be
named AMVESCO. The merger is subject to several conditions, one of
which is that the shareholders of both INVESCO PLC and AIM must approve
the merger. The merger should be completed by February 28, 1997 (the
``Effective Date''). The merger will result in a change in control of
INVESCO because approximately 45% of the
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outstanding stock of INVESCO PLC will then be owned by shareholders of
AIM. The change in control also would result in an assignment of the
Existing Agreement, thereby terminating that agreement in accord with
its terms and the provisions of Section 15(a) of the 1940 Act.
3. On February 12, 1997, the board of trustees of the Fund is
scheduled to meet to discuss the merger and the approval of the New
Agreement. The board also will consider whether to call a special
meeting of the Portfolio's shareholders to consider approving the New
Agreement as required by the 1940 Act.
4. The trustees, including a majority of the trustees who are not
``interested persons'' of the Adviser or of INVESCO, as that term is
defined in the 1940 Act, should evaluate, with the assistance of
counsel, the New Agreement. The trustees will consider several factors
in evaluating the New Agreement, for example: that the New Agreement
contains substantially identical terms and conditions, including
identical advisory fees, as contained in the Existing Agreement; and
the assurances of INVESCO that it would provide investment advisory and
other services to the Fund during the Interim Period and thereafter,
and that the services provided will be of the same quality as those
provided before the Interim Period.
5. The board also will consider the following factors: (a) whether
payment of subadvisory fees to INVESCO during the Interim Period would
be appropriated and fair since there will be no diminution in the scope
and quality of services provided to the Portfolio; (b) that the fees to
be paid during the Interim Period are the same as the fees paid under
the Existing Agreement: (c) that the fees earned by INVESCO during the
Interim Period will be maintained in an interest-bearing escrow account
until the New Agreement is approved or disapproved by the shareholders
of the Portfolio; (d) and whether the nonpayment of investment advisory
fees during the Interim Period would be unduly harsh in light of the
services provided by INVESCO to the Fund during the Interim Period.
Applicants' Legal Analysis
1. Applicants request an order of the Commission pursuant to
Section 6(c) of the 1940 Act exempting them from the provisions of
Section 15(a) of the 1940 Act. The order would permit INVESCO to serve
as investment subadvisor, without formal approval by the shareholders,
pursuant to the New Agreement. The order would cover the Interim Period
and would permit INVESCO to receive from the Adviser the fees earned
under the New Agreement.
2. Section 6(c) provides, in pertinent part, that the Commission
may, by order upon application, conditionally or unconditionally exempt
any person, security or transaction from any provision of the 1940 Act
if and to the extent that such exemption is necessary or appropriate in
the public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and the provisions of the
1940 Act. Section 15(a) prohibits an investment advisor from providing
investment advisory services to an investment company except pursuant
to a written contract has been approved by a majority of the voting
securities of such investment company. Section 15(a) further requires
that such written contract provide for its automatic termination in the
event of an assignment. Under Section 2(a)(4) of the 1940 Act, an
assignment includes any direct or indirect transfer of a contract by
the assignor or any direct or indirect transfer of a controlling block
of the assignor's voting securities.
3. Applicants anticipate that the merger will take place on
February 28, 1997, and that the indirect parent of INVESCO will change
as a result of the merger. The merger, therefore, will result in an
``assignment'' of the Existing Agreement within the meaning of Section
2(a)(4) of the 1940 Act. Upon assignment, the Existing Agreement will
terminate by its own terms and pursuant to Section 15(a).
4. Rule 15a-4 under the 1940 Act provides, in pertinent part, that
if an investment advisor's, or, as here, a subadvisor's, investment
advisory contract is terminated by assignment, the investment advisor
may continue to act as such for 120 days at the previous compensation
rate if a new contract is approved by the board of directors of the
investment company, and if the investment advisor or a controlling
person of the investment advisor does not directly or indirectly
receive money or other benefit in connection with the assignment.
Applicants concede that they may not rely on Rule 15a-4 because
INVESCO, PLC and its shareholders may be deemed to receive a benefit in
connection with the assignment of the Existing Agreement because
INVESCO, PLC, the parent of INVESCO, will receive substantial
consideration from AIM for the merger.
5. Applicants submit that the termination of the Existing
Agreement, effected through the merger, will cause the board of
trustees of the Fund to consider appropriate actions in the best
interests of the Portfolio and its shareholders. Applicants submit that
the scope and quality of services provided to the Portfolio during the
Interim Period will not be diminished. Applicants further submit that,
while they may not rely on Rule 15a-4, they believe that the requested
belief is consistent with the spirit of that rule and in the best
interests of the Fund. Applicants further submit that appropriate
escrow arrangements will be established to collect fees payable to
INVESCO during the Interim Period under the New Agreement.
Conditions for Relief
1. Applicants represent that the New Agreement will have the same
terms and conditions, including identical investment management fees,
as the Existing Agreement. The New Agreement will have a different
effective date than the Existing Agreement and will have provisions for
the escrow arrangement not contained in the Existing Agreement.
2. Applicants further represent that the advisory fees paid to
INVESCO by the Adviser will be paid into an interest-bearing escrow
account until paid to: (a) INVESCO in accordance with the New
Agreement, after the requisite shareholder approval is obtained; or (b)
in the absence of such approval, to the Portfolio.
3. The Portfolio will hold a meeting of the shareholders to vote on
approval of the New Agreement on or before the expiration of the 120th
day following the termination of the Existing Agreement, but in no
event later than June 30, 1997.
4. Neither the Fund nor the Portfolio will pay any costs of
preparing and filing the application, or any costs of soliciting a vote
of the Portfolio's shareholders in connection with the merger.
5. INVESCO will take all appropriate steps to ensure that the scope
and quality of advisory and other services provided to the Portfolio
during the Interim Period will be at least equivalent, in the judgment
of the board of the Fund, to the scope and quality of services
previously provided. In the event of any material change during the
Interim Period in the manner of or the personnel providing services
pursuant to the Interim Agreement, INVESCO will apprise and consult
with the board of the Fund to ensure that the board, including a
majority of its independent trustees, is satisfied that the services
provided will not be diminished in scope or quality.
[[Page 6590]]
6. Before the termination of the Existing Agreement, the board of
the Fund, including a majority of its independent trustees, will have
approved the New Agreement as required by Section 15(c) of the 1940
Act.
Conclusion
For the reasons set forth above, Applicants submit that the
exemptive relief requested is necessary and appropriate in the public
interest, and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the 1940 Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-3431 Filed 2-11-97; 8:45 am]
BILLING CODE 8010-01-M
